Judgment:
ORDER
1. W.P. No. 9426 of 1987 is for quashing the order of respondent dated June 1, 1987 in TN/SDC/6567/Accts. 87, demanding a sum of Rs. 35,157.29.
The said order is for recovery of damages from March 1975 to May 1976; April 1975 to June 1975; May 1977; October 1977; November 1977; April 1978 to October 1978; March 1979; April 1979; July 1979 to October 1979; December 1979; February 1980; March 1980; May 1980; June 1980; August 1980 to October 1980; December 1980 to May,1981; July 1981; September 1981; October 1981; December 1981; January 1982; March 1982; May 1982; June 1982 and also August 1982 are claimed.
2. The petitioner was engaged in manufacturing of 'Aditya' power sprayers. The petitioner could not continue the production and ultimately closed down in the year 1974-75. Thereafter the petitioner started manufacturing ancillaries for automobiles and defence. The firm became sick. Hence they could not make even statutory payments like Provident Fund, E.S.I. Etc., on time, due to lock-out, strike and loss etc. On June 1, 1987, the respondent passed an order under Section 14(1)(b) of the Employees' Provident Fund and Miscellaneous provisions Act demanding a sum of Rs. 35,147.20 as damages for the period from March 1975 to August 1982. The respondent has not considered the reasons given by the petitioner for the delay. Further after a lapse of nearly 12 years the respondent was asking the petitioner to pay damages from 1975 to 1982.
3. There is no counter-affidavit in the main W.P. No. 9426 of 1987. However, authenticated carbon copy of the counter affidavit was furnished before this court at the time of hearing. In the counter affidavit it is stated that the reasons adduced by the petitioner could not be accepted for committing defaults. Usual explanations like financial loss, strike etc., for not paying the amount could not be accepted. Failure to remit the provident fund dues within the time limit amounted to default by the employer and it would attract levy of damages under Section 14B of the Act. The levy was only after considering the facts and circumstances of the case. The levy is to recoup the loss incurred by the employees by way of loss of interest and to penalise the employer preventing him from repeating defaults in future.
4. W.P. No. 10926 of 1987 is for quashing the order dated October 20, 1987 in TN/SDC/8318/Accounts/87 passed by the respondent and to reconsider the representation of the petitioner dated July 15, 1987.
5. The petitioner is a partnership firm doing business interalia of manufacture of pressure die castings. The provisions of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (hereinafter referred to as the Act) applies to the petitioner. On January 19, 1987 the petitioners were shocked to receive a claim stating that for the periods in 1976-77 and 1981-82 they have not made certain E.P.F. contributions. Further, the notice required the petitioner to show cause as to why penalty under Section 14B of the Act should not be levied. The petitioner sent a reply on July 15, 1987 setting out the difficulties experienced by the petitioner such as labour and financial problems and yet the contributions were made before the end of the same month during which payments were due but not before 15th of the month as required by the statute. The representation also states that there was no delay after 1982. In spite of the reply, an order of the respondent dated October 20, 1987 was served on the petitioner imposing penalty of 1 00% of the amounts of delayed contribution which works out to Rs. 1,59,121.80.
6. Counter affidavit has been filed by the respondent in this writ petition also. In the Counter affidavit it is stated that the petitioner defaulted in payment of the Provident Fund Contribution. Hence, show-cause notice was issued to them, personal hearing was recorded. The written representation dated July 28, 1987 was considered. After considering the representation the percentage of damages was reduced. The levy of damage was to compensate the loss of interest and also to impose penalty to caution not to repeat the delayed payment in future. The petitioners have habitually committed default in payment of the Provident Fund Contribution. As a result of default, the organization had to give benefit lesser than what could have been possible by it, if there were no defaults. In the absence of any provision for condoning the delayed payment, waiving the levy of damages would not be possible. Such provisions are not made in the Act, for the legislators felt that the employees should not be deprived by the delay of the employers and Section 14B of the Act is to levy damages for the delayed payments and also penalise the employers for the delayed payment and warn them not to repeat such defaults in future.
7. In these two cases, we find that the alleged defaults have been committed from 1975-76 to 1982. The first default in the first case is in October 1975. The second one was in June 1976. Similarly, in the second case the first default is in March 1975 to May 1976. The defaults in both the cases have continued but intermittently. Yet the notices from the respondent have been sent proposing to levy damages only in 1987, after a lapse of more than 1/2 decades from the first default and 5 years after the last default. I am not able to understand as to why the respondent has not chosen to warn the employers when they committed first default. He could have taken the delayed step earlier. It is true that the responsibility on employer is statutory but can we hold that there is no duty cast upon the respondent to act reasonably and promptly when especially he is entrusted with the welfare of the employees. I am forced to observe as above, because in almost all the cases, which come up for hearing before me the demand for payment of penalties has been invariably made after a lapse of more than 1 1/2 decades from the first default.
8. Apart from the levy of damages, I also find no determination of damage in both the cases. The respondent has mentioned in the counter that the damage is only to compensate the loss of interest and also a penalty for caution not to repeat the delay. If that is so the loss of interest could have been determined in both the cases. In W.P. No. 10926 of 1987 details of the amounts demanded are also not properly mentioned. The first item is mentioned as provident fund contributions, not as damages.
9. In M/s. Snap Tap Machine Accessories (India) Pvt. Ltd v. Regional Provident Fund Commissioner, Tamilnadu Madras W.P. No. 8154 of 1987 dated June 25, 1996 1 have taken the following view.
'Therefore, it is not correct to say that the supreme Court has altogether eschewed the view that there must he assessment or determination of loss sustained by the department or organization. On the other hand, the word reparation for the amount of loss suffered by the employees is an indication that there must be assessment or ascertainment of the damages.'
Therefore, without actual determination or assessment, the respondent cannot simply levy penalty.
10. Learned counsel for the petitioner brought to my notice the following decisions;
1) 1978 LIC 930;
2) : (1979)IILLJ416SC
3) : (1985)ILLJ283Mad
In M/s. Hindustan Malleable and forgings Ltd. v. The Regional Provident Fund Commissioner And Others 1978 L.I.C. 930, a Divisional Bench of the Patna High Court has taken the view that the determination of damages is not an inflexible application of a rigid formula, and the competent authority must apply its mind to the fact, and circumstances of the case. The said observation has been made after holding that it was necessary that the order should be a speaking order containing at least indication or the consideration of relevant aspects and a statement and reasons that weighed in the imposition of damages. In the said case, there was no conformity with the principles of natural justice. Learned Judge of the Patna High Court expressed the said opinion relying upon the decision in Coal Mines Provident Fund Commissioner Dhanbad and Ors damages were determined.
11. Another judgment cited by the learned counsel for the respondent is Regional Provident Fund Commissioner, Tamil Nadu v. South India Flour Mills (P) Limited And Others : (1985)ILLJ283Mad where in the First Bench of this Court has considered the two judgments of the Supreme Court in Coal Mines Provident Fund Commissioner v. J. P. Lala & Sons (Supra) And Organic Chemical Industries Case : (1979)IILLJ416SC . After a full discussion of the judgment as well as the scope of Section 14B of the Act in para 10, learned Judges held that the damages referred to in Section 14B should be a penal element; the damages are not to be restricted only to the loss of interest to an individual employee caused by non-deposit or late deposit of the contribution by the employer. Even in this judgment, it is not stated that there is no necessity to ascertain the damages. In my view, the damages have to be found and ascertained and then something more should be added to it by way of penalty.
12. Since the aforesaid decisions are not against my view in W.P. NO. 8154 of 1987 dated June 25, 1961 find that the impugned orders cannot be sustained. In these circumstance, the writ petitions deserve to be allowed. Accordingly the two writ petitions are allowed. However there will be no order as to costs. In view of the disposal of the main writ petitions, W.M.Ps 13837 of 1987 and 16053 of 1987 are dismissed.